Effect of Decimalization

Discussion in 'Trading' started by mama, Dec 24, 2001.

  1. Hitman


    First of all, The Hitman started late October 2000, and everyone starts off losing money, regardless of who you think you are. It took me three and half months to collect my first check, so the 40K a year comment is off the mark, as I have been playing for 14 months, not 24.

    And no, I don't think I can make more money elsewhere, did you check the job market lately? At 22 without a degree, the 73K or so I can make this year is about as high as I can hit it.

    What people don't realize is that it takes many years's worth of study and low pay's for a Doctor/Lawyer to hit it home, and day trading is by no means a shortcut to success. You need to look at it as a career, and first year against first year, well, my competitors are still in law/medical school, and I don't expect them to put up any fight until 5 years from now.

    It is a marathon not a sprint, and what matters to me is where I will be in 5 years. Of course, I expect to see steady progress, but making 73K a year first year is nothing to be ashamed of. It can only get better.

    As for decimalization ruined certain strategies. First of all, the only strategy that decimalization ruined, is people who buy the BID and sell the ASK, trying to make a spread in a relatively stagnant stock. The spread is smaller and you can't pull this off anymore, big deal, find something else that works.

    Everyone else who complain about decimalization, I have to wonder what hell are you smoking?

    The Nasdaq is at 2000, not 5000, 4000, or even 3000, the trading range got smaller. That is the reason why stocks (technology stocks that is) don't move as much as they used to. No one said you have to be trading technology stocks however, there are many other sectors out there and you just need to look at home builders, that's a mini-bubble right there. You want a stock in 200's with one point spread? Try NVR. You want stocks that move 3 points on a day like Monday? Try RYL. The Dow was at 12K before, now it is at 10K, there is still money to be made, shut up and play.

    Ok, so the classic patterns don't work anymore, why do you think they are called classic patterns? Find something new that works for you. Do you really expect that anyone will give away their trading secret?

    Instead of trading 100 shares and make two points, you need to trade 1000 shares and make a quarter. There are a lot of people out there who are still looking for a point or two every time they take a trade, and they will remain bag holders until they change that mentality.

    When you say oh back then I would make 3/8 and now I would make 10 cents with the same volume/volatility, you are blind. The stocks don't move in pennies, they spread it half a point just like the good old days when the momentum is there. Decimalization only ruined pure scalpers.

    What really ruined the momentum crowd is not decimalization, it is the simple fact that breakout's and breakdown's don't work properly anymore. Your entry must be precise, you must wait for pullbacks because almost most breakout's will pullback before they make their real move. The market has been choppier and slower because a lot of people don't trade anymore after they got blown out in 2000/2001, that's the real reason behind the tougher market.

    And no one said this will improve soon, an extended depression will potentially make the market flat lining for a long time. But just as there were people who made money on a slow choppy day like Monday, there will be people who make money in a choppy market. It is the survival of the fittest, for as long as there are winners there will be losers.

    Trading is about survive the bad times so you are actually playing the game when the good times come, if it is so easy, everyone would be doing it, are you really expecting free lunch?
    #11     Dec 25, 2001
  2. I was one of those people that used Farrells spread strategy with NYSE stocks.. well.. i used a variation.. and when i realized that decimals were going to eliminate that form of trading, i learned to do something else.. personally i dont think decimals have muted price movements so much.. the reason is that decimalization did not increase the number of shares in the market.. if someone decides to buy 1 million shares of jnpr at the open, there arent any more shares available just because of decimalization.. and the stock will still move as it always has.. what is happening though.. is where there is a balance between buying and selling pressure, the stock tends to find equilibrium within a much smaller range.. this makes zero difference to the opportunities within the market.. the reason is because this is a game of probabilities.. its how you structure the risk/reward that counts.. while the rewards for some strategies have been dramatically reduced, the risk/reward ratio for other strategies has been favorably enhanced.. the other day Don Bright commented that his better traders only average a profit of a few cents per share..

    trading isnt getting better or worse because of decimalization.. its just different than it once was.. its how you approach the market that is working better or worse..

    #12     Dec 25, 2001
  3. mama



    Ok...so in 14 months you made 73K...and you are 22...and no college degree...

    Well, first of all you do not really need a college degree to be a "daytrader"...second, if you have put so much time and effort in some other business as you did in daytrading, you could have been more successful...but again it all comes to what you love to do...

    I'm not a daytrader, although I do make intraday trades sometimes...I take positions and typically hold them on average 3 days...from 1997 to 2000 I averaged a low seven figure, this year I made high six figures...although I have graduated from an Ivy League School with two Masters, I do not think that helps me in trading...

    Regarding the topic of decimalization, I have been told by lots of daytraders from firms such as Hold Bros that daytrading is being hit hard, primarily with the arrival of decimalization...I jus learn that these guys are strictly scalpers...anyhow, since I'm not a daytrader, I believe that these folks knew more about decimalization than I...

    So, Hitman, I'm not smoking anything, I'm just making a multiple of what you're making, and do not need to be engaged in recruiting anyone in order to make six figures...I'm just trying to find out why so many daytraders are dropping out of the race this year...also why would I just shut up and trade, as you suggested...isn't this a forum for an open discussion in order for anyone to gain new knowledge...when you start making a seven figure, you can then maybe tell people who you do not know to shut up and trade...until then happy learning, writing and trading!
    #13     Dec 25, 2001
  4. jem


    I do not feel like typing out a lecture here about how some specialists run their books but some of the newer traders here do not really know what has happened to them.

    As of a few months ago the specialists profits have gone way up. They are now (once again) the supreme day traders. Allowing the specialists and floor brokers to penny a dot trader has not only whacked daytraders but many other trading firms. If you read industry stuff and talk to a few firm traders you will hear them complain.

    I am sure that eventually enough hedge funds and mutual funds will complain and things might go back to 2cents. But if you do not realize that decimalization has hurt your ability to get a price you must be trading with market orders or you are trading with very fair specialists.

    Now before I hear foolish lectures again let me state that I have adjusted and will always adjust, I just wanted to let you know that the specialists love the decimals at your expense. I was on the floor during the summer and spoke with them. I complain because when the market runs hard in my favor and I am offering out into momentum I want my fill, not and offer one cent below mine or vice versa for shorts.
    #14     Dec 25, 2001
  5. Hitman



    ***if you have put so much time and effort in some other business as you did in daytrading, you could have been more successful***

    Like what? I would love to hear it.

    If I am making seven figures or high six figures you probably won't see me on this board. Anyway, how long have you been trading and how long did it take you to reach this point?

    ***I'm just making a multiple of what you're making, and do not need to be engaged in recruiting anyone in order to make six figures...***

    With an attitude like that, it is safe to say by the time I am actually your age I would be ahead, if you don't already blow up by then.

    If you are not a day trader then why post some crap like "oh decimalization ruined day trading and you should all be swing trading?". There is money to be made both time frames.


    I trade stocks like CRA, DNA, GS, MWD, MER, LEH regularly. Specialists will always make money, and I like decimalization because the spreads are narrower and I can control my entry more. The loss of momentum is mainly due to the broad market condition and can not be characterized upon decimalization alone.

    And it is not a foolish lecture I am giving, I always offer out a few cents below the ASK, and if there is momentum they will take it, if there is no momentum they won't take it, just like that good old days.
    #15     Dec 25, 2001
  6. The bottom line is that decimalization has put a major dent into daytrading. I know of one office that had 90% of the traders profitable prior to decimalization and now after decimals the % is well the % is 0% profitable. With that out of the way, the successful daytraders will be those who will change versus those who will stick to their guns and continue to trade the same as they did before. It really amazes me how closed minded some traders are, particularly to change. Those that are closed minded or stubborn will ultimately have to fail in the long run.
    #16     Dec 25, 2001
  7. rhoffman



    I was not referring to any specific strategy. As repeated here, and elsewhere, so many times, each individual needs to find something that works for his/her personal makeup (phycology if you prefer). I respectfully would disagree with your belief that discipline and patience can not be taught. If you hold that belief, you are absolutely right, you can't. I have personally discussed this with Richard Bandler, one of the original developers of NLP. I am certainly not suggesting that NLP is the only way to do this. I have just seen it work so many times, so effectively, that I tend to choose using NLP as a useful model for change. NLP is specifically designed to allow any person (provided there is nothing biologically wrong) to duplicate what any other person has done. As I specified earlier, everything you are even potentially capable of hinges on the beliefs you hold regarding a given subject. No matter how fabulous a strategy one might possess, lacking the correct beliefs, you probably cannot succeed at any endeavor. I think that this is really what is meant by saying trading is 20% mechanics and 80% phycology. I realize that this sounds incredibly simplisitic, touchy feely, phyco-babble nonsense; but, I have found it to be true. There is NOTHING in the field of human endeavor that is not directly affected by a person's belief structure. Yes, you certainly can learn a new language with these ideas, as well as how to build a house, communicate more effectively, golf better, be healthier, play the piano, even trade better. I happen to race sports cars and have used NLP techniques to lower my heart rate, drive smoother, control pain and improve healing, finish higher on a consistant basis, and perhaps more important than anything else, have more fun. I realize I'm going to upset a few people with saying this, but, winning at anything begins in your head. Learning discipline and patience starts with acting AS IF you are the person you want to be, and then be that person. I fought this idea for 20 years as too simple and foolhardy. Out of misery I tried it. It works if you let it. I think most of the world has fought this idea, perhaps that's why most of the world never succeeds at any endeavor. Trading is no different, very few master the sport. The good new is, anyone can. Who among us is/are willing to pay the price?
    #17     Dec 25, 2001
  8. Markets appeared to be getting harder to short-term trade even before decimalization, at least for me they were, with fewer straight up or straight down moves. There are several reports on this board of people finding it much tougher this year.

    I wonder if the easy money days were a one-time aberration allowing exploitation of short term inefficiencies that existed just because short-term trading by the masses was such a new situation. My working hypothesis is that it will continue to get harder and harder to short term trade as the survivors of the game and those they try to exploit (specialists, institutions, etc.)apply their considerable brain-power to beating each other, resulting in the markets becoming more and more efficient in the short term.

    I have no idea how it will work out, but a thought that keeps coming to me is the game of musical chairs, where the participants warily circle, going nowhere but looking to gain position, and, after a signal, engage in a brief flurry of activity that decides winners and losers, followed by more circling going nowhere......etc. This might imply the mid-day doldrums expanding with more and more of the action being concentrated in the first and last hours, more choppy trendless days, shallower sloped trending days with more retracements, more frequent and bigger overnight gaps, etc.

    Just a thought, are there any other blue-sky ideas of where we might be headed?
    #18     Dec 25, 2001
  9. I think that most firms who aren't making money are not making money b/c they have bad traders. I don't think it would be much different now without decimilization, except their traders would be loosing more in slippage. I use almost only market orders on the nyse, and have no problem. Honestly, if I'm gonna look for a 1.5pt move, I don't care where i'm filled within the spread, and I don't care how wide the spread really is if it's within reason. This is b/c even without decimals, I would assume that buying 10-30k of a stock that only trades 200-500k a day is gonna move the price anyway. The only difference now is that I can penny up on the bids and not have to go up .06 on the bid to be best bid. This means that I actually move the prices up LESS.
    As for profitability, I believe that contrary to what you think, hitman will be more profitable than you in a year or 3. It's simple math. Unless you get big promotions, your salary is pretty much topped out at some point. I intend to continue to make 200%+ annually, and I believe that hitman does as well. This means that within a little while, compounding will allow me and hitman to make far more in future years. BTW, where could I as a 20 year old who hasn't completed college make low 6 figures on his second full year of a career?
    #19     Dec 25, 2001
  10. Hitman



    Thanks for the props, but if what he said is true then I don't think I can challenge him in 3 years. In 10 years, possibly, 3 years is most definitely pushing it for high six figures / seven figures.

    And he makes his money from swing trading. I always take what people tell me for granted until I find proof that they are not truth to their words. I would rather overestimate someone than underestimate.
    #20     Dec 25, 2001